Why telecoms is broken (and how to fix it)

The core of the telecoms industry has an economic and technical disconnect between user value and network economics. The underlying issue is a misplaced priority of quantity over quality. The first step to fixing the disconnect is to become aware of it.

The telecoms business has a fundamental disconnect at its core: the value it offers is at odds with its revenue model, the products on offer, and their cost model. This is serious stuff! Because this disconnect is so deep and pervasive, it is hard to see and difficult to overcome.

When you buy a telecoms service today, it is with only one purpose: to attach a computer and have it communicate with other computers. Your TV is a computer, your desk phone is a computer, and your house thermostat is a computer. You wear a supercomputer on your body all day. Your data is all stored on other people’s computers out there somewhere nebulously called “the cloud”.

Those computers are all running applications that need to exchange information. A few applications have huge volumes of data and can tolerate slow replication, and for these we ship DVDs in the post, or even whole shipping containers of hard drives. However, most applications require that data to arrive within milliseconds to hours, and so physical delivery is not possible.

Thus the value of any telecoms service is in offering more timely delivery of information than the postal service. In other words, the value is in quality; and the amount of value is then a matter of a quantity of quality.

Not convinced yet? As a thought experiment, imagine a 1 gigabit per second broadband service that only costs $1 a month, but comes with a small catch: the information is delivered at 100Gbps for the first hundredth of every second, and then does nothing for the remaining 99% of the time.

That’s certainly a gigabit per second service! But it is also useless for all applications. You probably couldn’t even do a file transfer using today’s protocols. What this demonstrates is that the value is not in the bandwidth, but in the timeliness of the information being delivered. In this case, making some information wait just a second to arrive in a frantic burst means the service is useless.

The problem the telecoms business faces is that whilst the value is located in quality, the revenue model and cost structure are expressed in terms of quantity. We advertise services based on throughput, bill them on volume, and plan and price them based on capacity. Everything today is located in a model of a “quantity with a quality”.

This places quality subservient to quantity, which is backwards when compared to the core value on offer. This didn’t matter at all when telcos sold fixed-quality landline voice and data circuits. It also didn’t matter too much at first when we moved to packet data as quality was being delivered by idle quantity. But with the move “faster” networks we have increasing domination of dynamic effects over static ones. In other words, the tension between the user reality and our core resource model is growing.

We are now at an inflection point. We see vendors trying to sell 5G both on the basis of its quantity (gigabits!) and its quality (low latency!). They can’t have it both ways: the quantity on offer will have terrible quality, and the quality will have terrible cost. The present paradigm is at the verge of breakdown, and it cannot be fixed.

So, what to do? Well, the first step to change is to modify nothing. Yes, that’s right. There’s an idea from Gestalt Theory, called Beisser’s Paradox of Change. We only change when we fully identify with what is, not with what might or could be.

So, for instance, the drug addict needs to keep a diary of when they used (or felt cravings), rather than focus on the willpower of abstinence. Paying attention to “what is not” is an unhelpful distraction to noticing “what is”.

Thus the first step to overcoming a nasty bandwidth addiction is to become aware of it and acknowledge it. You need to begin to understand what qualityyou are delivering with your quantity. This needs to be expressed in the terms of the customer, not some arbitrary internal network metric.

You also need to become aware of the management system and theory you are using to measure and manage quality. Every telco has a quality management system, even if they don’t know it or make it explicit.

Only then when you truly see “what is” will you be in a position to begin a program of change to evolve. The journey from a “quantity first” model to a “quality first” one will be a long trek involving many incremental changes. The end goal is to reconnect the user value on offer to the revenue and cost models.

Survival is not mandatory, and those who take the first step soonest will have the best chance of making it to the destination. If you would like to take that first step to quality awareness, then we are running a workshop in London on 15th March to help.

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I am an expert on the telecommunications business. I help senior executives to make sense of what is happening, anticipate what is coming, and to act decisively in the face of uncertainty. My long-term professional goal is to facilitate three paradigm shifts: for data networking to become a true science; for voice to evolve its own native form of hypermedia; and for cloud-based enterprises to have the most efficient and effective possible means to communicate with their customers - Martin Geddes. Contact us here